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Palo Alto Networks (PANW) Q4 Earnings Top Estimates, Rise Y/Y

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Palo Alto Networks (PANW - Free Report) reported fourth-quarter fiscal 2019 non-GAAP earnings of $1.47 per share, which not only improved 14.8% year over year but also surpassed the Zacks Consensus Estimate of $1.45.

Moreover, the company’s revenues of $805.8 million increased 22% year over year, outpacing the consensus estimate of $803 million.

The impressive results were mainly driven by several deal wins and the increasing adoption of the company’s next-generation security platforms. Growing traction in newer Prisma and Cortex offerings was another tailwind.

In a parallel announcement, Palo Alto clarified its intent to acquire the IoT security start-up Zingbox for $75 million.

Quarterly Details

Product revenues increased approximately 12.3% to $305.7 million. The company also witnessed a 29.4% jump in subscription and support revenues to $500.1 million.

Further, billings improved 22% year over year to $1.1 billion. Deferred revenues rose 27% to $2.9 billion as well.

Region wise, revenues from the Americas climbed 24.7% while revenues from Europe, the Middle East and Africa, and Asia Pacific were up 17.6% and 16.8%, respectively.

During the quarter, the company added nearly 3,000 customers. It boasts 65,000 customers currently.

Additionally, Palo Alto’s non-GAAP gross margin expanded 130 basis points (bps) on a year-over-year basis to 77.5%.

While non-GAAP operating expense of $450.4 million as a percentage of revenues expanded 400 bps to 55.9%, non-GAAP operating margin contracted 270 bps to 21.6%.

Palo Alto Networks, Inc. Price, Consensus and EPS Surprise

Palo Alto Networks, Inc. Price, Consensus and EPS Surprise

Palo Alto Networks, Inc. price-consensus-eps-surprise-chart | Palo Alto Networks, Inc. Quote

Balance Sheet

Palo Alto exited the fiscal fourth quarter with cash, cash equivalents and short-term investments of approximately $2.8 billion compared with $3.7 billion at the end of the preceding quarter.

The company’s balance sheet does not have any long-term debt.

It generated cash flow from operations of $231.5 million compared with $275.4 million in the previous reported quarter. Free cash flow came in at $178.4 million.

Fiscal 2019 Highlights

For fiscal 2019, the company reported total revenues of $2.9 billion, which grew 28% year over year.

Also, revenues from its products rose 24.6% year over year to $1.01 billion. Plus, revenues from Subscription and support improved 29.4% to $1.8 billion.

Guidance

For the first quarter of fiscal 2020, Palo Alto anticipates revenue growth of 16-17% year over year. Billings growth is anticipated between 15% and 17% year over year.

Non-GAAP earnings per share are estimated in the range of $1.02-$1.04, which includes expenses related to the acquisition of Zingbox.

For fiscal 2020, the company expects billings to increase in the range of 17-19% year over year. Revenue growth for the fiscal is envisioned to grow within 19-20% year over year. The company expects billings growth of its next-generation security business (Prisma and Cortex) at 77-79%.

Non-GAAP earnings per share are estimated in the band of $5-$5.1 for fiscal 2020.

Moreover, management projects a 20% CAGR for total billings and total revenue over the next three years. The company hopes to achieve $6 billion in total billings and $5 billion in total revenues by fiscal 2022.

Zacks Rank & Stocks to Consider

Palo Alto currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Anixter International (AXE - Free Report) , LogMeIn (LOGM - Free Report) and Perficient (PRFT - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Anixter, LogMeIn and Perficient is currently projected to be 8%, 5% and 10.8%, respectively.

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